How to effectively save in The Bahamas
The art of learning how to effectively save is key to anyone’s personal financial success. For a large number of people, saving is a very daunting task, but for some people, they find it quite easy to save consistently. To be brutally honest, we’ve all heard of how to save and what we should do to save money countless times. The most common reason why most people fall short is that they aren’t consistent in their saving habits. There is no secret that we all fall short and make mistakes financially, but all financial planners expect that there will be mishaps and unexpected financial commitments that come up which can shift a person’s saving routine. Despite these unexpected financial commitments, there are still some critical points that I think most Bahamians overlook and don’t take into consideration when it comes to effectively saving.
One of the key components of learning how to effectively save is by setting a financial goal. When initially starting to save, it is smart to set a short-term goal for a six month period. You must decide on a reasonable number you can save every month until the end of that period. This short-term goal will encourage you as you continue to save for the long term. The only way these short-term goals can be achieved is by making calculated steps along the way.
These calculated steps must begin by saving with institutions that give you the most return on your savings. Most commercial banks offer less than one percent on your savings account, which isn’t conducive to effectively saving. Bahamians should take a closer look at a few credit unions that offer as much as three percent compounded interest quarterly on regular savings. This isn’t a groundbreaking rate, but in comparison to commercial banks, it is pretty amazing. Some of these institutions are very helpful, have trusted track records and are also regulated by the Central Bank of the Bahamas.
Any Bahamian, no matter age or financial background should know the importance of saving and how it is the stepping stone to economic freedom. The term “paying yourself first”, is a common phrase that most people use for saving. It is very effective because the mindset influences a person to look out for themselves first. A lot of times people get caught up with thinking about paying all the bills and then forget about themselves after all their money is spent. It is advised that you save 10 percent of your income a month and live on the other 90 percent. So in essence, pay yourself 10 percent every month. The remaining 90 percent will allow you to pay your bills and other expenses comfortably. Over time, once you feel comfortable and have mastered saving 10 percent monthly, you should increase the percentage by two percent every year. This will allow your savings to increase annually and have you feeling secure and confident in all situations because you are prepared for the worst. Eventually, you will be in a position where you would have six months of your monthly salary saved, in case of an emergency.
The “paying yourself first” methodology along with setting a monthly budget is critical because this will help you stay in line and know your parameters of spending. Stay committed to your budget and do not deviate from it. A common pitfall for persons when it comes to saving is that when they get an increase in salary or a new revenue stream they begin to spend more. This is a very familiar trap that most millennials have fallen into and are still struggling to get out of. Consistency in saving is critical, and despite the increase or new revenue stream, you must stick to the script and not deviate. Sticking to your budget and customary lifestyle will allow you to build your savings.
After those first initial steps are done, you will be well on your way to saving effectively, but another tough obstacle for most Bahamians will begin. Developing self-restraint and learning how to simply say no will make or break your savings. You cannot engage in impulsive buying, which is a bad trait and counterproductive to your savings goal. Online shopping can be addictive, and in recent years has transformed the consumer market globally. A simple way to deal with this impulse is to wait. Before you make that quick online purchase, wait for a period of seven days before purchasing the item. This will allow a couple things to happen. It will help you determine whether you truly had a genuine desire for the item and, by waiting for a week, it may also allow for the price of the item to drop.
Most people becoming wealthy after they have saved sufficient funds and have made smart investments. A lot of people want to invest, but in order to invest, you must first save to be a financial situation to experience a possible loss. The art of saving money must be mastered, and with self-restraint and consistency, it can be easily mastered. George S. Clason who wrote the book, “The Richest Man in Babylon” said “riches start with saving”.
- Quinton C. Lightbourne is a certified financial planner with the Chartered Institute of Bankers in Scotland and presently works with the investment and financial services team of a local law firm.